Functional Strategies are organizational plan for various functional areas including human resources, marketing, research and development among other functional areas. It is customized to a specific industry and is used to back up other corporate and business strategies. The functional-level strategy is narrower in scope than a business-level strategy because each strategy deals with each of the major functions of business
OBJECTIVES OF FUNCTIONAL STATEGIES
1. Profitability. Aim at producing at a net profit in the business being the different between cost of production and selling price.
2. Gaining and increasing market share of organization’s product.
3. Human talent. Recruiting and developing high talent workforce
4. Financial soundness. Acquiring and utilizing financial resources in order to earn returns
5. Product quality. Producing high quality product and services
6. Social responsibility. Making a positive contribution to the society.
TYPES OF FUNCTIONAL STRATEGIES
• Financial strategy
• Human resource
• Research and development
• Information management strategy
The goal of the marketing strategy is to establish customer loyalty and to reach out to new markets. No matter how good the product is, people have to know about it before they buy and in that respect marketing strategy may be the most important functional strategy. For example, when Coca-Cola decided to expand in its Japanese market, it developed a wide range of marketing strategies, including establishing a distribution sales force, installing a number of vending machines at strategic locations and investing heavily into promotion of the product. As a result, Coca-Cola- captured nearly 70 percent of Japanese market for soft drinks.
The financial strategy deals with acquisition of financial resources, analyzing cost structure, estimating profit potential, accounting functions and so on. The financial resources may be acquired by floating stock offering, loans from banks or other private sources. For example, the new European Disneyland outside Paris was financed by issuing special classes of stock while Continental Airlines borrowed a lot of money to finance its growth in the 1980s.
The operations function involves production processes, inventory levels, quality of product, quality of raw materials, making adjustments in plant capacity and so on. It primarily stems from the company’s market strategy, which, for example, may require high quality, high priced products or low priced, low quality mass produced products.
Some of the current innovative ideas that may be incorporated in an operation (or production) strategy are automation, use of robotics and so on. For a multi-national organization, a production strategy may involve locating facilities in countries where raw materials and human resources are cost efficient.
d. Human resources:
An effective human resources strategy is useful in a number of related areas. These areas include number of employees required, training needs, skill levels required, compensation, performance appraisal and so on. Relationship with labour unions is an important aspect of human resources strategy. Executive development programs require strategic attention.
For example, if an organization anticipates opening new plants in the near future, it must plan on locating and developing potential managers for these plants. Training managers for foreign assignments is a very important strategic task for international organizations.
e. Research and development:
When business-level strategy involves innovations in the areas of product development or improvement in service, the research and development (R & D) function supports this strategy.
The R&D strategy may include a policy in protecting the company’s patents and licenses. Merk ; Co. has a strong commitment to research and development programs and its success has been due to a number of new-product breakthroughs which has given it a competitive advantage.
f. Information systems:
Information systems strategy supports the business-level strategy by providing necessary and relevant information to all functional areas and all levels of management. The availability of advanced technology computers can store and analyze data, and convert such data into useful information which can be presented to management for decision making purposes. Managing information system is an important aspect of efficient operations.
Functional Level Strategy of Co-Cacola
To lead competitive advantage a company can either perform functional activities:
• At a cost lower than its competitors.
• Easily to differentiate its goods and services from those competitors.